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Home My WebLink About2025.0909.TCWSES.AGENDA.PACKET NOTICE OF MEETING WORK AND EXECUTIVE SESSIONS TOWN COUNCIL Mayor Gerry M. Friedel Vice Mayor Allen Skillicorn Councilmember Gayle Earle Councilmember Brenda J. Kalivianakis Councilmember Hannah Larrabee Councilmember Peggy McMahon Councilmember Rick Watts TIME: WHEN: WHERE: 1:00 PM - WORK AND EXECUTIVE SESSIONS DOORS OPEN 15 MINUTES PRIOR TO THE START OF THE MEETING. TUESDAY, SEPTEMBER 9, 2025 WORK SESSION - FOUNTAIN HILLS COUNCIL CHAMBERS EXECUTIVE SESSION - FOUNTAIN CONFERENCE ROOM 16705 E. AVENUE OF THE FOUNTAINS, FOUNTAIN HILLS, ARIZONA Councilmembers of the Town of Fountain Hills will attend either in person or by telephone conference call; a quorum of the Town’s various Commission, Committee or Board members may be in attendance at the Council meeting. Notice is hereby given that pursuant to A.R.S. §1-602.A.9, subject to certain specified statutory exceptions, parents have a right to consent before the State or any of its political subdivisions make a video or audio recording of a minor child. Meetings of the Town Council are audio and/or video recorded and, as a result, proceedings in which children are present may be subject to such recording. Parents, in order to exercise their rights may either file written consent with the Town Clerk to such recording, or take personal action to ensure that their child or children are not present when a recording may be made. If a child is present at the time a recording is made, the Town will assume that the rights afforded parents pursuant to A.R.S. §1- 602.A.9 have been waived. REQUEST TO COMMENT The public is welcome to participate in Council meetings. TO SPEAK TO A CONSENT OR REGULAR AGENDA ITEM, complete a Request to Comment card and hand it to the Town Clerk prior to discussion of that item. Include the agenda item NUMBER on which you wish to comment. A separate submission is required for each agenda item. Request to Comment cards will not be accepted once the Council deliberations begin. Submit a Request to Comment card prior to a public hearing agenda item. TO COMMENT ON A CONSENT OR REGULAR AGENDA ITEM IN WRITING ONLY, complete a Request to Comment card, indicating that it is a written comment, check the box on whether you are FOR or AGAINST a consent or regular agenda item, and hand it to the Town Clerk prior to discussion on that item. A separate submission is required for each agenda item. TO SPEAK TO CALL TO THE PUBLIC, complete a Request to Comment card and hand it to the Town Clerk. Speakers will be allowed three contiguous minutes to address the Council. Verbal comments should be directed through the Presiding Officer and not to individual Councilmembers. TO COMMENT IN WRITING ONLINE, Visit https://www.fountainhillsaz.gov/publiccomment and submit a Request to Comment card no later than 12:00 PM on the day prior to the meeting. These comments are shared with the Town Council. This Request to Comment card, and any information you write on it, is a public record subject to public disclosure. NOTICE OF OPTION TO RECESS INTO EXECUTIVE SESSION Pursuant to A.R.S. §38-431.02, notice is hereby given to the members of the Town Council, and to the general public, that at this meeting, the Town Council may vote to go into executive session, which will not be open to the public, for legal advice and discussion with the Town's attorneys for legal advice on any item listed on the following agenda, pursuant to A.R.S.§38-431.03(A)(3). Meeting Packet Page 1 of 39 1. CALL TO ORDER 2. ROLL CALL 3. WORK SESSION STATEMENT All Items Listed Are for Discussion Only. No Action Can or Will Be Taken. The primary purpose of work sessions is to provide the Council with the opportunity for in-depth discussion and study of specific subjects. Public comment is not provided for on the agenda and may be made only as approved by consensus of the Council. In appropriate circumstances, a brief presentation may be permitted by a member of the public or another interested party if invited by the Mayor or the Town Manager to do so. The Presiding Officer may limit or end the time for such presentations. 4. WORK SESSION AGENDA a. DISCUSSION: Relating to Community Center Fees/Waivers for Local Nonprofit Organizations b. DISCUSSION: Relating to Employee and Council Pay Adjustments 5. ADJOURNMENT 6. CALL TO ORDER 7. ROLL CALL 8. EXECUTIVE SESSION PURSUANT TO A.R.S. §38-431.03(A)(3) Discussion or consultation for legal advice with the attorney or attorneys of the public body.; and PURSUANT TO A.R.S. §38-431.03(A)(4) Discussion or consultation with the attorneys of the public body in order to consider its position and instruct its attorneys regarding the public body's position regarding contracts that are the subject of negotiations, in pending or contemplated litigation or in settlement discussions conducted in order to avoid or resolve litigation. (Specifically, related to the N-Shea Group LLC development agreement) 9. ADJOURNMENT Dated this 5th day of September 2025. Bevelyn J. Bender, Town Clerk The Town of Fountain Hills endeavors to make all public meetings accessible to persons with disabilities. Please call (480) 816-5100 (voice) or (800) 367- 8939 (TDD) 48-hours prior to the meeting to request reasonable accommodation to participate in the meeting or to obtain agenda information in large print format. Supporting documentation and staff reports furnished to the Council with this agenda are available for review in the Clerk's Office. Meeting Packet Page 2 of 39 ITEM 4.a. TOWN OF FOUNTAIN HILLS STAFF REPORT Meeting Date: 9/9/2025 Meeting Type: Town Council Work and Executive Sessions Submitting Department: Community Services Prepared by: Kevin Snipes, Community Services Director Staff Contact Information: Phone: 480-816-5178 Email: ksnipes@fountainhillsaz.gov Request to Town Council Regular Meeting (Agenda Language) DISCUSSION: Relating to Community Center Fees/Waivers for Local Nonprofit Organizations Staff Summary (background) Several Councilmembers and the Mayor have raised questions regarding local nonprofit fees and waiver practices at the Community Center. While Council previously discussed and took action on this matter, implementation was suspended pending further review and discussion. This work session will provide an opportunity to examine the importance of applying uniform waivers for all local nonprofits to ensure consistency and transparency in Community Center use. In addition, staff will present multiple options for revising the nonprofit fee/waiver for potential future action, or staff will implement the previously voted-on revised fees if that is the direction of Council. Related Ordinance, Policy or Guiding Principle NA Risk Analysis NA Recommendation(s) by Board(s) or Commission(s) NA Staff Recommendation(s) NA Suggested Motion No motion is required at this time. This item is presented for discussion to obtain Council direction regarding the fee policy, which will be brought forward at a future Council meeting for consideration and action. FISCAL IMPACT Fiscal Impact: Budget Reference: Funding Source: ATTACHMENTS Meeting Packet Page 3 of 39 1. Community Center Fees/Waivers Meeting Packet Page 4 of 39 Presented by Kevin Snipes Community Services Director Community Center Fees/Waivers Meeting Packet Page 5 of 39 Discussion Topic: Local Nonprofit Fees •Fee Structure: Determine how much local nonprofits should pay to use the Community Center. •Consistency: Apply a uniform fee policy across all nonprofit organizations to ensure fairness. •Administrative Efficiency: Streamline accounting and billing processes for staff by using clear, consistent rates. •Resource Management: Set fees in a way that promotes efficient use of staff time and facility resources. •Community Impact: Fees should reflect the value of facility use while balancing community benefit and operational costs. Why are we here? Meeting Packet Page 6 of 39 Current Situation Illustrated Full Rate - $100 per hour Resident/Nonprofit Rate - $50 per hour Discount 1 Discount 2Discount 3 Discount 4 Discount 5 Discount 6 Discount 7 Discount 8 Discount 9 Discount 10 Meeting Packet Page 7 of 39 Desired Situation Illustrated Full Rate - $100 per hour Resident/Nonprofit Rate - $50 per hour Local Nonprofits Rate – Council Direction Meeting Packet Page 8 of 39 • Spanish Classes • Line Dancing • Bridge • Mah Jongg • Bunko • Exercise & Yoga • Poker • Free Tech Guidance • Open Jam • Alzheimer’s Support • Caregivers Support • Band and Choir Concerts • Conferences/Conventions •Medicare Consultations •Open Paint Studio •Quilts and More •Golden Age of Radio •Swing Time •Bingo •Veterans to Veterans Discussion Group •Weddings •Quinceañeras •Friends in the Hills •Bridge Tournaments •Gun Shows •Bar and Bat Mitzvahs •Friends in the Hills •Blood Drives •Volunteer Programs •Band and Choir Concerts •Income Tax Preparation •Memory Café •Pinochle •Cribbage •Trade Shows •HOA Meetings •Political Parties •FH Women's Club •Realtor Meetings •Four Peaks Rotary •Community Groups •Breakfast with Santa •Sensitive Santa •Munch and Music •Table Tennis •Dominoes •Wood Carvers •Grief Support Community Center Programing Meeting Packet Page 9 of 39 2025 Total Ballroom Reservations Meeting Packet Page 10 of 39 *There are 65 total Local Nonprofits who have used the Community Center in the past few years **Tonight's discussion only effects the Local Nonprofit Rates Total Ballroom Reservations FY25 = 435 Total Local Nonprofit Reservations FY25 = 106 Ballroom Reservations FY25 Meeting Packet Page 11 of 39 8 Past Fee Reduction or No Charge Examples •First 60hrs free then 50% off room rentals •Free stage installation ( Note: labor intensive) •Previous direction allowed local non-profit pricing for a Scottsdale non-profit •Items provided with reduced or no cost recovery: •Display Board •Microphones •Screens •Projectors •Coffee •Reservations outside of standard hours of operation •50% reduction in direct staffing cost recovery Meeting Packet Page 12 of 39 Reasons for Minimum Hourly Requirements •Limited Availability of Ballrooms – Booking for very short timeframes reduces availability for other renters who may need the space for longer events. •Operational Efficiency – Preparing and turning over the ballroom for each rental (setup, cleaning, breakdown) requires staff time and resources regardless of the rental length. •Maximizing Earning Potential – Shorter rentals can block off prime time slots, which limits opportunities to secure longer, higher-value bookings. •Event Flow & Guest Experience – A minimum booking ensures adequate time for setup, event execution, and cleanup, resulting in a smoother experience for both hosts and guests. •Cost Effectiveness – Staffing, utilities, and facility upkeep costs are incurred for every event; minimum hours help cover these baseline expenses. Opening the building for one ballroom is not cost effective. Ballroom Minimum Requirements Meeting Packet Page 13 of 39 Community Center Revenues and Expenditures Past 3 Fiscal Years *This analysis captures most Community Center operating revenues/expenditures other than the Volunteer and Home Delivered Deals programs, or capital improvement costs. **Includes estimated utility costs, which are shared among other facilities on the Town Campus. Meeting Packet Page 14 of 39 Local Non-Profit Rental Revenues and Discounts Past 3 Fiscal Years Total Calculated Rental Fee Discounts for Local Nonprofits: •FY2023 Discounts: Data unavailable •FY2024 Discounts: $58,456 •FY2025 Discounts: $57,475 Meeting Packet Page 15 of 39 12 Average charges Per Meeting 1) $77.65 2) $206.80 3) $103.40 4) $206.80 5) $147.08 6) $155.10 7) $150.38 Example Fees and Discounts Full Price Per Meeting $155.10 $561.02 $354.22 $561.02 $397.90 1BR $561.36/2BR $871.36 2hrs $404.50 4hrs $507.90 Yearly chargeWith discount $271.43 $1,861.20 $930.60 $2,068.00 $1,764.96 $1,706.10 $3,238.55 Yearly withoutDiscount $2,791.80 $5,049.18 $3,187.98 $5,179.88 $4,774.80 $6,174.96 - $9,587.16 10,517.00 - $13,205.40 Difference $2,520.37 $3,187.98 $2,257.38 $3,111.88 $3,009.84 $4,468.86 - $7,881.06 $7,278.45 - $9,966.85 *Seven example local Non-profit groups highlight the inconsistent discount procedure and the variable cost recovery models Meeting Packet Page 16 of 39 Options Give all groups the same discounted rate which would include the following options: Option 1) (Currently Approved) Apply Current Resident/Nonprofit rates (no Sunday rentals) Mon-Thur: $25 classroom 2hr min, $50 per ballroom 4hr min Fri-Sat: $75 per ballroom 4hr min Option 2) Create a separate local nonprofit Discounted rate option 10% off above rates Mon-Thur: $22.5 classroom 2hr min, $45 per ballroom 4hr min Fri-Sat: $67.5 per ballroom 4hr min 30% off above rates Mon-Thur: $17.5 classroom 2hr min, $35 per ballroom 4hr min Fri-Sat: $52.5 per ballroom 4hr min 50% off above rates Mon-Thur: $12.5 classroom 2hr min, $25 per ballroom 4hr min Fri-Sat: $37.5 per ballroom 4hr min Meeting Packet Page 17 of 39 Video Projector - Note Vision 3,000 Lumens $55.00 Flat Screen TV $55.00 Small Screen $55.00 Large Screen (8' x 10')$55.00 Microphones – Wireless $25.00 Portable White Board $5.00 Walker Display Board $5.00 Portable Sound System $85.00 Dance Floor - per 4' x 4' parquet square (16’x16”)$225.00 Dance Floor - per 4' x 4' parquet square (20’x20’)$280.00 Dance Floor - per 4' x 4' parquet square (24’x24’)$325.00 Staging 6' x 8" section (1 piece)$25.00 per piece Coffee Service $25.00 per request Portable Bar $50.00 Labor Charges (min of 2 staff per hour) $55.00 per hour per staff Meeting Extras, Current Itemized costs Meeting Packet Page 18 of 39 Meeting Optional Extras Staff Recommendation: $25.00 Flat fee for each of the following, per meeting: •All Audio Video options, including: Video projector and screen, flat screen TV, microphones, speakers, walker display board, etc. •Coffee service Exceptions: •Stage: $25.00 per section, per meeting •Dance Floor at standard rate Meeting Packet Page 19 of 39 What Happens Next? •Choose fee range that you would like staff to implement •If no change to policy, no additional action needed •Policy suspension ends per previous council action, rental rates resumed as directed for FY26 •Vote, if needed on new changes, during the Oct 7 Council Meeting •Public Comment to be heard •Minimum 30 days to go into effect •Recommend Jan 1 implementation, to allow for notice to all local non-profits Meeting Packet Page 20 of 39 Review of Options Give all groups the same discounted rate which would include the following options: Option 1) (Currently Approved) Apply Current Resident/Nonprofit rates (no Sunday rentals) Mon-Thur: $25 classroom 2hr min, $50 per ballroom 4hr min Fri-Sat: $75 per ballroom 4hr min Option 2) Create separate local nonprofit Discounted rate options 10% off above rates Mon-Thur: $22.5 classroom 2hr min, $45 per ballroom 4hr min Fri-Sat: $67.5 per ballroom 4hr min 30% off above rates Mon-Thur: $17.5 classroom 2hr min, $35 per ballroom 4hr min Fri-Sat: $52.5 per ballroom 4hr min 50% off above rates Mon-Thur: $12.5 classroom 2hr min, $25 per ballroom 4hr min Fri-Sat: $37.5 per ballroom 4hr min Meeting Packet Page 21 of 39 Questions/Comments Meeting Packet Page 22 of 39 ITEM 4.b. TOWN OF FOUNTAIN HILLS STAFF REPORT Meeting Date: 9/9/2025 Meeting Type: Town Council Work and Executive Sessions Submitting Department: Administration / Finance Prepared by: Paul Soldinger, Chief Financial Officer Staff Contact Information: Phone: 480-816-5160 Email: psoldinger@fountainhillsaz.gov Request to Town Council Regular Meeting (Agenda Language) DISCUSSION: Relating to Employee and Council Pay Adjustments Staff Summary (background) At the June 17, 2025 Town Council meeting, Council discussed both annual employee pay increase concepts and Council pay adjustments. The consensus from that discussion was to direct staff to develop a systematic, blended approach to annual employee salary adjustments. Accordingly, this report focuses narrowly on that directive. It is not intended to revisit the Town’s overall compensation strategy or broader pay policies. This proposal establishes a transparent, repeatable mechanism for annual salary adjustments that reflects both national labor cost trends and the competitive local labor market. The goal is to ensure our compensation remains market-relevant while avoiding ad- hoc or subjective changes that can create inconsistency and unpredictability in our budgeting process. Therefore, staff will discuss a proposed approach to use a peer market index (PMI), based on the annual League of Arizona Cities & Towns Salary & Benefit Survey and the Employment Cost Index (ECI) published by the U.S. Bureau of Labor Statistics (BLS) every year. The formula-based pay adjustment would be calculated by March of each year to be included in the proposed budget presented to Council every April, based on budgetary availability. Regarding past discssuion about using the Consumer Price Index (CPI) as a data point for this calculation, staff had found that CPI is more volatile and may not accurately reflect actual wage trends in the labor market. Focusing staff pay adjustments on PMI and ECI provides a more comprehensive and stable approach to salary adjustments, which also provides stability in each year's budget. Regarding Council stipends, the Town Council retains full authority over its own compensation; staff recommends a consistent process to ensure transparency and budget clarity. For example, Council could consider adjustments every two years, aligned with election cycles, which would be effective the following January past the election cycle and Council approval. The changes made to Council stipends is at the Council discretion. Related Ordinance, Policy or Guiding Principle N/A Risk Analysis Meeting Packet Page 23 of 39 N/A Recommendation(s) by Board(s) or Commission(s) N/A Staff Recommendation(s) N/A - For Discussion Suggested Motion No motion required. This item is for discussion on employee and council pay adjustments that may be brought back to a future Council meeting for possible action. FISCAL IMPACT Fiscal Impact: Budget Reference: Funding Source: ATTACHMENTS 1. Staff Pay and Council Stipend Adjustments Presentation 2. Proposed Annual Salary Adjustment Rule Meeting Packet Page 24 of 39 Annual Salary Adjustments A transparent framework for consistent compensation management using market data September 9, 2025 Meeting Packet Page 25 of 39 Contents 01 Problem & Solution Overview Current ad-hoc approach vs systematic formula 02 Key Components ECI, PMI, and formula methodology 03 Historical Performance Backtesting results and analysis 04 Council Pay & Implementation Plan Next steps and timeline Meeting Packet Page 26 of 39 Market Data Sources Balanced National & Local Approach Combining Employment Cost Index (ECI) from Bureau of Labor Statistics with Peer Market Index (PMI) from 28 Phoenix-metro municipalities creates comprehensive market responsiveness Meeting Packet Page 27 of 39 Proposed Formula Year ECI Rate PMI Rate Proposed AGA Actual Increase Variance FY 2023 4.4%3.22%3.81%4.0%+0.19% FY 2024 5.1%4.99%5.05%7.0%+1.95% FY 2025 4.1%6.11%5.11%4.5%-0.61% FY 2026 3.6%5.44%4.52%2.5%-2.02% Simple & Transparent Calculation Annual General Adjustment (AGA) = (50% × ECI) + (50% × PMI). This formula directly responds to market conditions without subjective interpretation. Meeting Packet Page 28 of 39 Understanding Our Data Sources Consumer Price Index (CPI) Measures household price changes for goods/services Includes volatile categories like energy and food May not reflect actual labor market conditions VS Employment Cost Index (ECI) Measures employer labor costs specifically Focuses on wages and salaries for same jobs Used by Federal Reserve for wage policy decisions Meeting Packet Page 29 of 39 28 Peer Cities 50/50 ECI/PMI Split Q4-Q4 ECI Measure Jan PMI Release Predictability Formula-based adjustments eliminate annual deliberation ▸Consistent calculation method ▸Transparent data sources ▸Budget planning certainty Market Balance Combines national stability with local competitiveness ▸National wage trend benchmark ▸Local market responsiveness ▸Reduced year-to-year volatility Implementation Integrates seamlessly into annual budget process with Council override capability ▸January PMI data availability ▸May-June budget adoption ▸Council retains flexibility to override for extraordinary circumstances Meeting Packet Page 30 of 39 Town Council Pay Adjustments Council Authority Council retains full authority over its own compensation; staff recommends a consistent process to ensure transparency and budgeting clarity. Process Framework • Consider adjustments every two years, aligned with Council/Mayoral election cycles (August) • Effective January following election cycle and Council approval • Budget integration: Changes could be incorporated into the budget process the spring prior to elections • Council discretion: For example the increase could be a percentage or flat amount Meeting Packet Page 31 of 39 Thank You Questions & Discussion Ready to implement systematic salary adjustments that balance fiscal responsibility with competitive compensation Meeting Packet Page 32 of 39 Proposed Annual Salary Adjustment Rule Town of Fountain Hills Purpose At the June 17, 2025 Town Council meeting, Council discussed both annual employee pay increase concepts and Council pay adjustments. The consensus from that discussion was to direct staff to develop a systematic, blended approach to annual employee salary adjustments. Accordingly, this report focuses narrowly on that directive. It is not intended to revisit the Town’s overall compensation strategy or broader pay policies. This proposal establishes a transparent, repeatable mechanism for annual salary adjustments that reflects both national labor cost trends and the competitive local labor market. The goal is to ensure our compensation remains market-relevant while avoiding ad-hoc or subjective changes that can create inconsistency and unpredictability in our budgeting process. Key Term Definitions Annual General Adjustment (AGA): A formula-based pay adjustment figure we have defined for internal use. It blends national wage growth data with local competitive pay trends to produce the annual adjustment percentage to be applied to employee compensation. Peer Market Index (PMI): Newly defined for our purposes, this represents the average pay range increase reported by a broad group of peer municipalities in the Phoenix metropolitan area, as reflected in the League of Arizona Cities & Towns Salary & Benefit Survey. The PMI captures compensation trends among comparable cities and towns in our region. Employment Cost Index (ECI): Unlike AGA and PMI, the ECI is a long-standing federal statistic produced by the U.S. Bureau of Labor Statistics (BLS). It measures the percentage change in employer labor costs (wages and salaries) from one quarter to the same quarter the previous year, holding job types constant to remove distortions from workforce composition changes. The ECI has been published quarterly since the late 1970s and is widely used by the Federal Reserve, government agencies, and private sector organizations to guide wage policy decisions. While the methodology has evolved over time (such as the adoption of NAICS/SOC classification systems in 2006), it remains historically comparable and provides a reliable national benchmark for wage trends. Meeting Packet Page 33 of 39 CPI in Context: Understanding Its Role in Salary Adjustments The Consumer Price Index measures household price inflation rather than the cost of labor. CPI can be significantly influenced by volatile categories such as energy prices or housing costs and may not accurately reflect actual wage trends in the labor market. Relying solely on CPI for salary adjustments creates several risks. First, it can lead to overpayment during temporary inflation spikes when consumer prices rise faster than wages. Second, it may result in underpayment in strong labor markets where wage competition drives compensation increases that exceed general inflation, potentially compromising our ability to retain and recruit quality employees. Why ECI Plus PMI Creates an Effective Framework The combination of ECI and PMI provides a more comprehensive and balanced approach to salary adjustments. The ECI provides a stable, national benchmark of wage trends that reflects actual labor market conditions rather than consumer price fluctuations. Meanwhile, the PMI captures the realities of the Phoenix-metro labor market in which we directly compete for talent. Combining both indices balances local competitiveness with national trends and reduces year-to-year volatility that might result from relying on either data set alone. This approach ensures our compensation strategy remains both fiscally responsible and competitive. Proposed Formula The Annual General Adjustment (AGA) would be calculated using the following formula: Annual General Adjustment (AGA) = (50% × ECI) + (50% × PMI) The ECI component uses the year-over-year percentage change in private industry wages and salaries, measured from Q4 to Q4 as reported by the Bureau of Labor Statistics. The PMI component represents the average percentage change in pay ranges among reporting peer municipalities in the League survey. This formula is designed to respond directly to market conditions, allowing the calculation to stand on its own merits. For example, if the ECI shows a 4.0% increase and the PMI shows a 5.0% increase, the calculation would be: AGA = (0.5 × 4.0) + (0.5 × 5.0) = 4.5% Historical Analysis To evaluate the effectiveness of this proposed approach, we conducted a backtest analysis comparing what the AGA formula would have produced against the actual salary increases implemented by the Town over recent fiscal years. Meeting Packet Page 34 of 39 For FY 2023, the PMI from the League survey averaged 3.22%, while the ECI showed a 4.4% increase. The proposed AGA would have been 3.81%, compared to the actual Town increase of 4.0%. This shows close alignment between the formula and actual practice. In FY 2024, the PMI was 4.99% and the ECI was 5.1%, producing a proposed AGA of 5.05%. The actual Town increase was 7.0%, suggesting the Town exceeded what market conditions would have supported under this formula. For FY 2025, the PMI reached 6.11% while the ECI was 4.1%, creating a proposed AGA of 5.11%. The actual Town increase was 4.5%, indicating the Town's adjustment fell slightly below what the formula would have recommended. Looking at FY 2026, the PMI was 5.44% and the ECI was 3.6%, yielding a proposed AGA of 4.52%. The actual Town increase was 2.5%, representing a gap below the formula recommendation. This historical analysis demonstrates that the proposed formula would have provided more consistent and market-responsive adjustments than the ad-hoc approach used in recent years. Benefits of Adopting the Rule Implementing this salary adjustment rule offers several significant advantages for the Town's compensation management and budgeting processes. Predictability: Once the Council approves the rule, annual salary adjustment numbers flow directly from the formula without requiring extensive deliberation each year. This creates certainty for both employees and budget planning purposes. Transparency: The data sources and calculations are clear and accessible to staff, Council members, and the public. Anyone can verify the inputs and understand how the adjustment percentage was determined. Balance: The formula combines stable national wage data with local market conditions, ensuring our adjustments reflect both broader economic trends and the specific competitive environment in which we operate. Consistency: The rule eliminates ad-hoc year-to-year changes that can create confusion in compensation management, enabling employees and managers to better anticipate and plan for adjustments. Market Responsiveness: By incorporating both national and local data, the formula helps our compensation remain competitive without overreacting to temporary market fluctuations. Meeting Packet Page 35 of 39 Implementation and Next Steps To successfully integrate this formula into our budget process, we recommend the following approach. The League PMI results typically become available in late January each year. During the annual proposed budget presentation, staff will present the updated ECI data, PMI results, and the resulting AGA calculation. This timing allows staff to incorporate the calculation into early-year budget meetings, with the process culminating in budget adoption during May and June. As part of our commitment to transparency, each year's budget presentation materials will include the calculation, showing the ECI and PMI inputs and the resulting AGA percentage. This documentation will be available to Council members and the public as part of the budget review process. The formula should be implemented in alignment with the guidance provided during the work study session, with the understanding that extraordinary circumstances may warrant Council consideration of deviations. Any such deviations should be justified and documented to preserve the integrity of the systematic approach. Data Sources and Methodology The PMI data comes from the League of Arizona Cities & Towns Salary & Benefit Survey, representing the average percentage increase reported by peer municipalities. Our peer group includes 28 municipalities in and around the Valley, and in most years, a substantial majority (20+) provide usable data, ensuring a reliable basis for the PMI calculation. The ECI data is sourced from the U.S. Bureau of Labor Statistics Employment Cost Index for Private Industry, Wages & Salaries, using the Q4-to-Q4 percentage change. This provides a consistent national benchmark that removes seasonal variations and focuses on the annual trend. Peer Municipality Reference The peer municipalities included in the League survey analysis represent a comprehensive group of cities and towns in the Phoenix metropolitan area and broader Arizona region. These include Apache Junction, Avondale, Buckeye, Carefree, Casa Grande, Cave Creek, Chandler, Coolidge, El Mirage, Eloy, Florence, Gilbert, Glendale, Goodyear, Guadalupe, Litchfield Park, Maricopa, Mesa, Paradise Valley, Peoria, Phoenix, Queen Creek, Scottsdale, Surprise, Tempe, Tolleson, Wickenburg, and Youngtown. This peer group represents municipalities of varying sizes and characteristics, providing a broad perspective on compensation trends in the regional labor market where Fountain Hills competes for talent. Meeting Packet Page 36 of 39 Supporting Analysis The accompanying charts illustrate key aspects of this proposal. The comparison of the proposed blended AGA against actual Town increases from FY 2023 to FY 2026 highlights where actual increases exceeded or fell short of the proposed AGA, underscoring the importance of systematic adjustment for market conditions. Meeting Packet Page 37 of 39 Additionally, the historical trends comparison between the Employment Cost Index and Consumer Price Index for all civilian workers demonstrates the relative stability of the ECI compared to the volatility of CPI. This visualization reinforces why the ECI serves as a more reliable benchmark for annual salary adjustments than consumer price indices, as it directly measures labor costs rather than consumer prices. Meeting Packet Page 38 of 39 Conclusion The proposed Annual Salary Adjustment Rule offers a clear, balanced, and market- responsive framework for determining annual salary adjustments. By incorporating national wage trends through the Employment Cost Index and local market conditions reflected in the Peer Market Index, this approach supports competitive compensation while maintaining fiscal responsibility. Historical analysis indicates that applying this formula would have resulted in consistent, well-reasoned adjustments, providing predictability for budget planning and transparency in decision-making. It offers a structured process that keeps salary adjustments aligned with both national economic conditions and local market realities. With its straightforward calculation and built-in transparency, this approach can be readily integrated into the annual budget process. Its adoption will help maintain competitive compensation while ensuring a clear, consistent, and accountable framework that benefits employees, Council, and the community. Meeting Packet Page 39 of 39